The Union Ministry of Civil Aviation (MoCA) released National Civil Aviation Policy (NCAP) 2016 on 15 June 2016. The policy’s mission is to provide safe, secure, sustainable air travel for passengers and air transportation of cargo with access to various parts of India and the world.
Vision of the Policy
- To create an ecosystem to make flying affordable for the masses
- To enable 30 crore domestic ticketing by 2022 and 50 crore by 2027.
- To increase international ticketing to 20 crore by 2027
- Increase cargo volumes to 10 million tonnes by 2027
- Establish an integrated ecosystem that would promote tourism, increase employment and balanced regional growth.
- To ensure safety, security and sustainability through the use of technology and effective monitoring.
- To enhance regional connectivity through fiscal support and infrastructure development.
- To enhance ease of doing business through deregulation, simplified procedures and e-governance.
- To promote the entire aviation sector chain in a harmonised manner covering cargo, MRO, general aviation, aerospace manufacturing and skill development.
Highlights of the NCAP 2016
Regional Connectivity Scheme (RCS): It will not allow the airlines to charge more than 2500 rupees for one hour flight between two small cities. The RCS will come into effect in the second quarter of 2016-17.
Code-share agreements: Indian carriers will be free to enter into code-share agreements with foreign carriers for any destination within India on a reciprocal basis. Indian carriers need to simply inform Ministry of Civil Aviation (MoCA) 30 days prior to starting the codeshare flights.
Encourage Private Security: The Government will encourage use of private security agencies at airports for non-core security functions. The private security agencies will comprise retired personnel from military and para-military forces.
No-Frills Airports: They will be built at an indicative cost of 50 crore to 100 crore rupees.
Viability Gap Funding (VGF): It will be shared between MoCA and the State Government in the ratio of 80:20 while it is 90:10 for the North Eastern States. The payment of the full amount of VGF will be made to the airline operator from the Regional Connectivity Fund (RCF) and the State Governments will be subsequently asked reimbursement. MoCA’s share of VGF will be provided through the RCF, which will be collected and operated by Airport Authority of India (AAI) or any other entity identified by MoCA. MoCA will persuade State Governments to make Value Added Tax (VAT) zero-rated on MRO activities to develop India as an MRO hub in Asia.
5/20 Rule: The requirement for 5/20 is modified and all airlines can commence international operations provided that they deploy 20 aircraft or 20 percent of total capacity (in term of average number of seats on all apertures put together), whichever is higher for domestic operations.
Bilateral Traffic Rights: Under this, government will enter into an ‘Open sky’ ASA on a reciprocal basis with SAARC countries and countries with territory located entirely beyond a 5000 kilometers radius from New Delhi. India has Air Service Agreements (ASA) with 109 countries covering aspects relating to the number of flights, seats, landing points and code-share.
Upgradation of Airports: Airport Authority of India (AAI) will continue to modernize the existing airports and upgrade quality of services. It will also maintain an ASQ rating of 4.5 or more across all airports which have a throughput above 1.5 mppa and ASQ rating of 4.0 or more for the rest.
Ground Handling Agencies (GHA): The airport operator will ensure that there will be three Ground Handling Agencies (GHA) including Air India’s subsidiary/JV at all major airports as defined in AERA Act 2008 to ensure fair competition. Advanced Cargo Information system: It will be implemented in a phased manner after a universally accepted international template has emerged. MoCA will be nodal agency for developing commercial aero-related manufacturing and its eco-system in India in line with Aeronautical Make in India.
Growth of helicopters: Government will support growth of helicopters for remote area connectivity and separate regulations for helicopters will be notified by DGCA.
Five takeaways from the Policy
The policy, which is the first since Independence, will go a long way in streamlining India’s ailing aviation sector and making it 3rd in the world from the present 10th rank. The policy will take ‘flying to the masses.’
- Affordability, connectivity and ease of doing business: India is the fastest growing aviation market with 21% plus growth in the domestic sector in 2015-16. The National Civil Aviation Policy is likely to enhance that further by taking flying to the masses through a slew of policy initiatives and fiscal and monetary support. The key focus of NCAP 2016 is on affordability, connectivity and ease of doing business.
- Subsectors will get a fillip: The regional connectivity scheme under NCAP will connect India’s remote unconnected regions, boost tourism, create jobs and stimulate the economy in tier 2-3 cities. Subsectors like MRO, Cargo, helicopters, general aviation and Make in India will get a fillip with liberalised operational norms and tax breaks. The highly illogical and anti-competition 5/20 rule has been replaced with 0/20, which effectively translates to 3/20 as it will take at least three-four years to have a 20 aircraft fleet.
- Consensus across various stakeholders: The policy has evolved with the widest and longest possible stakeholder consultation. The policy covers over 22 aspects of aviation. Bringing all stakeholders together, many of whom have conflicting interests is an herculean task – one of the reasons why we have never had an integrated aviation policy since 1947 despite many sincere attempts in the past.
- Silent on some critical issues: The NCAP is unfortunately silent on other issues like formation of an independent Civil Aviation Authority (CAA), privatisation of Air India, marketlisting of AAI, hive-off of Air Navigation Services (ANS) from AAI. Some of these measures can be taken outside the ambit of NCAP since these involve mostly government-owned entities.
- The real work begins now: Making the first-ever integrated aviation policy was tough. The road ahead will be tougher as we go for its implementation in letter and spirit. If the government, industry and end-users work together keeping India’s national interest in mind,there’s no reason why India can’t achieve its vision of becoming the third largest aviation market by 2020 and the largest by 2030.